Correlation Between Consumer Discretionary and Amplify ETF

Can any of the company-specific risk be diversified away by investing in both Consumer Discretionary and Amplify ETF at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Consumer Discretionary and Amplify ETF into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Consumer Discretionary Select and Amplify ETF Trust, you can compare the effects of market volatilities on Consumer Discretionary and Amplify ETF and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Consumer Discretionary with a short position of Amplify ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consumer Discretionary and Amplify ETF.

Diversification Opportunities for Consumer Discretionary and Amplify ETF

0.87

Correlation Coefficient

Consumer Discretionary  Amplify ETF

Very poor diversification

The 3 months correlation between Consumer and Amplify is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Consumer Discretionary Select and Amplify ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amplify ETF Trust and Consumer Discretionary is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Consumer Discretionary Select are associated (or correlated) with Amplify ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amplify ETF Trust has no effect on the direction of Consumer Discretionary i.e., Consumer Discretionary and Amplify ETF go up and down completely randomly.

Pair Corralation between Consumer Discretionary and Amplify ETF

Considering the 90-day investment horizon Consumer Discretionary Select is expected to generate 0.87 times more return on investment than Amplify ETF. However, Consumer Discretionary Select is 1.15 times less risky than Amplify ETF. It trades about 0.18 of its potential returns per unit of risk. Amplify ETF Trust is currently generating about 0.13 per unit of risk. If you would invest  20,016  in Consumer Discretionary Select on September 26, 2024 and sell it today you would earn a total of  2,901  from holding Consumer Discretionary Select or generate 14.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Consumer Discretionary Select  vs.  Amplify ETF Trust

Consumer Discretionary

Risk-Adjusted Performance

14 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Consumer Discretionary Select are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Consumer Discretionary showed solid returns over the last few months and may actually be approaching a breakup point.

Amplify ETF Trust

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Amplify ETF Trust are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental indicators, Amplify ETF may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Consumer Discretionary and Amplify ETF

The main advantage of trading using opposite Consumer Discretionary and Amplify ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consumer Discretionary position performs unexpectedly, Amplify ETF can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Amplify ETF will offset losses from the drop in Amplify ETF's long position.

The idea behind Consumer Discretionary Select and Amplify ETF Trust pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.